Russia's EU pipeline at 'risk' after US vote

Five EU firms taking part in Russia’s Nord Stream II gas pipeline could face US fines under new sanctions approved by Congress.

The bill, which sailed through the House of Representatives by 413 votes to three, “targets the things that matter” to the Kremlin, Ed Royce, a Republican deputy, said in the debate in Washington on Tuesday (25 July).

Friends in high places: Former German chancellor Gerhard Schroeder (l) is a leading Nord Stream lobbyist (Photo: nord-stream.com)

Eliot Engel, a Democratic deputy, said: “This administration has shown over and over that they are willing to cozy up to [Russian leader Vladimir] Putin. But here’s the truth: Putin is not our ally”.

The bill must pass a second Senate vote, expected in August, and to be signed by US president Donald Trump.

It is also set to sail through the upper house after a first draft passed by 98 votes to two in June.

The Trump administration is unlikely to veto it because the whopping majority in Congress could subsequently overturn such a veto.

The measures threaten to impose fines on investors in energy projects in which Russian entities have at least a 33 percent stake.

That would put German companies Uniper and Wintershall, Austrian firm OMV, French company Engie, and Anglo-Dutch firm Shell, which aim to help Russia build the Nord Stream II pipeline to Germany, in the crosshairs.

One US source, who asked not to be named, told EUobserver that they would be unlikely to face imminent action but that they should see the bill as a “risk”.

“It’s a warning shot that we may sanction it [Nord Stream II] in the future - it increases the risk,” the source said.

Creating risk

Andras Simonyi, a Hungarian diplomat who studies transatlantic relations at Johns Hopkins University in Washington, said: “This is serious and investors in Nord Stream II should expect a backlash”.

He said the bill targeted the pipeline as a “message to the EU” that the “short-term corporate interests of a few cannot supersede strategic security interests”.

“The EU should heed the advice of those who are recommending a reconsideration of the project, including the possibility of abandoning it … Germany especially cannot continue to argue that Nord Stream II is just a business proposition”.

The Russian-owned Nord Stream II consortium told EUobserver on Tuesday that it “does not comment on ongoing legislative processes”.

But its spokesman said he agreed with Monday’s warning by Business Europe, a Brussels-based lobby group, that the sanctions “would mainly hit the EU, its citizens and its companies”.

Russia’s deputy foreign minister, Sergei Ryabkov, said the US measures were “a very dangerous mine [that] is being planted under the foundations of relations between our countries”.

Thomas Pickering, a former US ambassador, told the Bloomberg news agency that the sanctions could lead to “escalation” in US-Russia tensions and that “tit-for-tat between both sides … gets us nowhere but closer to conflict”.

The new measures come on top of previous EU and US economic sanctions imposed in reaction to Russia’s invasion of Ukraine.

Tuesday’s bill, which was prompted by Russia’s meddling in last year’s US elections and by its actions in Syria, also threatens fines against firms that help Russia to extract oil from Arctic offshore deposits or that help it to sell arms.

It imposes credit limits on six Russian banks and it forbids Trump from deleting sanctions without Congressional approval.

EU reaction

The European Commission aims to discuss the US vote at a college meeting in Brussels on Wednesday.

Member states’ diplomats will also debate Russia sanctions at a low-level meeting in the Council of the EU on the same day.

The Commission has indicated that it would take Germany’s side in trying to push back against the US move.

Its spokesman said on Tuesday that its opposition to the sanctions “relates to EU energy independence and energy security”.

His line echoed the German and Austrian foreign ministers, who said in a joint statement in June that the US move “impacts European-American relations in a new and very negative way.”

“Europe’s energy supply network is Europe’s affair, not that of the United States of America … We decide who supplies us with energy, and how they do it,” they said.

A Commission memo leaked to press this week said there was a “serious risks of detrimental political spillovers” if the US went ahead.

It said the EU might pass a law to limit US jurisdiction on the issue or take retaliatory measures against US firms.

But those measures would be unlikely to get the required consensus in the Council to go ahead, amid opposition to Nord Stream II by central European and Nordic countries.

Splitting Europe

The pipeline’s critics say it would harm EU energy security by concentrating 70 percent of Russian gas exports in the German route.

That would help Russia to use gas prices or cut-offs to blackmail former Iron Curtain states.

It would also harm Ukraine by making its transit pipelines obsolete at a time when the country was trying to align itself with the West.

Building the pipeline “risks splitting the continent [Europe]”, Simonyi, from the Johns Hopkins University, said.

“This [the new sanctions] is also a message to the EU that western members should not make deals over the heads of eastern members,” he said.

Opinion

While few people in Europe have heard of the 'Achmea' ruling, the case will have far-reaching consequences. Member states must understand the implications of the case quickly - especially those considering ratifying the EU-Canada trade agreement.